Ottawa urged to aid news publishers
Report proposes changing tax laws for digital ads as industry faces crisis
A new report commissioned by the federal government is urging Ottawa to consider changing tax laws to favour Canadian news publishers in the digital advertising market and use the new revenue stream to establish an independent, publicly subsidized journalism fund.
The recommendation comes from the independent think-tank Public Policy Forum, which says advertising with foreign-owned websites should no longer be deductible under the federal Income Tax Act. This is already standard for print newspaper and broadcast advertising.
Authored by former journalist Edward Greenspon, “The Shattered Mirror: News, Democracy and Trust in the Digital Age” issues a dire warning that the media industry in Canada is at a “crisis point” where a deficit of local reporting caused by falling revenues and cuts to journalism jobs threatens the country’s democracy.
The report recommends that, by extending a 10 per cent withholding tax on advertising in foreign digital media, the government could create a new revenue stream of $300 million to $400 million annually. It suggests Ottawa use that revenue stream to finance a fund to support digital news innovation in Canada, which would back news organizations that are determined to provide a “civic function,” with a particular emphasis on local and indigenous content.
The fund, which would act as an independent agency, should be seeded with a startup investment of $100 million and financed by the tax on foreign advertising in the years to follow, the report’s authors recommend. Part of its mandate should be to provide legal advice and assistance to support startup news organizations “so they can pursue their journalism without fear of reprisal.”
The tax changes, which would also include extending the GST to foreign online ads, could notably draw revenue from foreign tech giants Google and Facebook, which the report says “were seen as suitable sources of funding for public programs, voluntary or not.” Together, Google and Facebook earn about two-thirds of the online advertising revenue in Canada.
“I think what the report does is validate what I and many other people who run newspapers in Canada have been saying all along,” said Paul Godfrey, CEO of Postmedia Network Inc., the country’s largest newspaper publisher and owner of the National Post. “There are no actual solutions here, but there are some good ideas.”
The report, mostly funded by the federal government, contains 12 recommendations, among which is a call for the government to establish a research institute to investigate the origins of and combat the distribution of fake news in Canada. In addition to tax law, the Public Policy Forum calls on the government to reform non-profit and charity rules to allow philanthropy-supported media organizations to operate in Canada. That would bring the country in line with others, such as the United States and Germany, where nonprofit investigative newsrooms like Propublica and CORRECT!V have thrived by producing independent work and partnering with other outlets.
In order to address an increasing shortage in local news resources, the Public Policy Forum says The Canadian Press wire service — which is privately held by Torstar Corp., The Globe and Mail and Gesca Limitée — should be given $8 million to $10 million out of the new journalism fund to establish a second non-profit news service to serve communities with coverage of courts, legislatures and city halls.
It also makes several recommendations for the Canadian Broadcasting Corporation. Among those, the organization says the CBC should cease selling digital ads, which would create a revenue gap of $25 million, and publish its news content under a Creative Commons licence, making it free for competing domestic news organizations to distribute.
“There is little precedent for this kind of digital-age approach among public broadcasters,” reads the report. “CBC would be staking out a leadership position.”
Canadian Heritage Minister Mélanie Joly said the Public Policy Forum’s report will be one among many resources the government reviews as it mulls ways to address upheaval in media economics, and added it was too soon to speculate on policy outcomes.
I think what the report does is validate what I and many other people who run newspapers ... have been saying all along.